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Test Bank for Principles of Macroeconomics, 13th Edition

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    1 Principles of Macroeconomics, 13e (Case/Fair/Oster) Chapter 1 The Scope and Method of Economics 1.1 Why Study Economics? 1) Which of the following is not listed in the book as a reason to study economics? A) to learn a way of thinking B) to understan d soc iety C) to be an informed citizen D) to learn how to make lots of money Answer: D Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Mi cro - 1 2) Among the fundamental concepts in economics is A) opportunity cost. B) marginalism. C) effic ient markets. D) all of the above Answer: D Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 3) Which of the following is the best definition of economics? A) the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided B) the study of how consumers spend their income C) the study of how business firms decide what inputs to hire and what outputs to produce D) the study of how t he federal government allocates tax dollars Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro - 1

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    2 4) The rise of the modern factory system in England during the late eighteenth and e arly nineteenth centuries i s kno wn as the A) Great Migration. B) Industrial Revolution. C) Wealth of Nations. D) Dark Ages. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro - 1 5) Which of the following statements is not correct? A) Economics is a beha vioral science. B) In large measure, economics is the study of how people make choices. C) If poverty were eliminated, there would be no reason to study economics. D) Economic analysis can be used to explain how both individ uals and societies make dec ision s. Answer: C Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 6) The study of economics A) is a very narrow endeavor. B) is a way of analyzing decision - making processes caused by scarcity . C) is concerned with proving that capitalism is better than socialism. D) focuses on how a business should function. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Definition Lear ning Outcome: Micro - 1 7) Which of the following is not one of th e thr ee fundamental concepts of economics? A) profit maximization B) marginalism C) opportunity cost D) the working of efficient markets Answer: A Diff: 1 Topic: Why Study Economics? Skill : Conceptual Learning Outcome: Micro - 1

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    3 8) Suppose that you pur chase d a ticket to a jazz festival for $100 from an online ticket broker. Once you arrived at the festival, you discovered that parking costs you an additional $15. In this situation, the add itional $15 you pay for parking is an example of A) an economic l oss. B) opportunity cost. C) marginal cost. D) an inefficient cost. Answer: C Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 9) You have decided that you want to attend a costume party as Bl ack P anther. You estimate that it will cost $40 to assemble your costume. After spending $40 on the costume, you realize that the additional pieces you need will c ost you $25 more. The marginal cost of completing the costume is A) $15. B) $25. C) $40. D) $ 65. A nswer: B Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1 10) The concept of opportunity cost A) is relevant only to economics. B) can be applied to the analysis of any decision - making pr ocess . C) applies to consumers but not to firms. D) refers only to actual payments and incomes. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1

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    4 11) Opportunity cost is A) that whic h we forgo, or give up, when we make a choice or a decision. B) a cost that cannot be avoided, regardless of what is done in the future. C) the additiona l cost of producing an additional unit of output. D) the additional cost of buying an additional unit o f a p roduct. Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro - 1 12) The reason that opportunity costs arise i s that A) an economy relies on money to facilitate exchange of goods and services. B) resources are sca rce. C) there are no alternative decisions that could be made. D) people have limited wants. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro - 1 13) Which of the following is not an opportunity cost of attending college ? A) the tuition you pay B) the income you could have earned if you didn't attend college C) the alternative uses of the time you spend studying D) the cost of the food that you consume while you are attending college Answer: D Diff: 2 Topic: Why Study E conom ics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1

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    5 14) If y our tuition is $5,000 this semester, your books cost $600, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you m ake $ 15 per hour, and your room and board is $3,000 this semester (same as if not attending co llege), then your opportunity cost of attending college this semester is A) $5,600. B) $5,900. C) $10,100. D) $11,600. Answer: C Diff: 3 Topic: Why Study Econom ics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1 15) If your tu ition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $7,500 this semester (same as if not attending colle ge), then your opportunity cost of attending college this semester is A) $26,500. B) $26,800. C) $31,000. D) $38,500. Answer: C Diff: 3 Topic: Why Study Economi cs? S kill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1 16) If you own a building and you decide to use that building to open a book store, A) there is no opportunity cost of using this building for a book store because you own it. B ) the re is an opportunity cost of using this building for a book store because it c ould have been used in other ways. C) the opportunity costs equal the cost of inventory. D) the only cost relevant to this decision is the price you paid for the building. A nswer : B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflectiv e Thinking Learning Outcome: Micro - 1

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    6 17) You own the video game Grand Theft Auto V . The opportunity cost of playing this game for the second time A) is zero. B) is one - ha lf th e cost of the game, as this is the second time you have played it. C) is the va lue of the alternative use of the time you spend playing the game. D) cannot be calculated. Answer: C Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Refle ctive Thinking Learning Outcome: Micro - 1 18) That which we forgo, or give up, when we make a choice or decision is called A) out - of - pocket cost. B) marginal cost. C) real cost. D) opportunity cost. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Defin ition Learning Outcome: Micro - 1 19) Economists often refer to risk - free ventures as A) efficient market outcomes. B) profit opportunities. C) those with no opportunity costs. D) break - even propositions. Answer: B Diff: 1 Topic: Why Study Economic s? Sk ill: Conceptual AACSB: Reflective Th inking Learning Outcome: Micro - 1 20) If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of the tenth DVD is A) $4. B) $13. C) $14. D) $130. Answer: A Diff: 2 Topic: Why St udy E conomics? Skill: Analytical Learning Outcome: Micro - 1

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    7 21) If you eat at a sushi restaurant that charges $20 for its all - you - can - eat sushi special, then the marginal cost of your 10th piece of sushi is A) zero. B) $2. C) $200. D) $2,000. Answer: A Diff: 2 Topic: Why Study Economic s? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1 22) A market in which profit opportunities are eliminated almost instantaneously is A) a laissez - faire market. B) a capitalist market. C) a soci alist market. D) an efficient mark et. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro - 1 23) If information is less costly and more easily available, then usually this A) makes markets more efficient. B) makes m arket s less efficient. C) increases profit opportunities. D) increases the opportunity cost of acquiring more information. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 24) An eff icien t market is a market in which A) everyone always gets what they want. B) profit opportunities are eliminated almost instantaneously. C) profits are always very high and persistent. D) opportunity costs are zero. Answer: B Diff: 2 Topic: Why S tudy Ec onomi cs? Skill: Definition Learning Outcome: Micro - 1

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    8 25) Related to the Economics in Practice on page 3: According to the Economics in Practice , when rains in rural India are plentiful, the opportunity cost of having someone out of the labor forc e, and there fore unable to work in agricultural production, A) increases. B) decreases. C) remains unchanged. D) is zero, because the person is out of the labor force. Answer: A Diff: 2 Topic: Why Study Economics?: Economics in Practice Skill: Conceptual AACSB : Re flective Thinking Learning Outcome: Micro - 1 26) Related to the Economics in Practice on page 3: According to the Economics in Practice , when rural India is suffering from a drought where agricultural output is low, the opportunity co st of having som eone out of the labor force, and therefore unable to work in agricultural production, is A) high B) low. C) infinite. D) zero, because the person is out of the labor force. Answer: B Diff: 2 Topic: Why Study Economics?: Economics in Pract ice Skill: Conc eptua l AACSB: Reflective Thinking Learning Outcome: Micro - 1 27) Related to the Economics in Practice on page 4: According to the Economics in Practice , in terms of wages and job availability, those students graduating during a recession with a degree in econ omics are ________ those graduating with a degree in sociology. A) better off than B) worse off than C) affected equally to D) There seems to be no correlation between a student's major and wages or employment during a recession. Answe r: A Diff: 1 To pic: Why Study Economics?: Economics in Practice Skill: Fact Learning Outcome: Micro - 1

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    9 28) Related to the Economics in Practice on page 6: According to the Economics in Practice , a majority of the $10 retail value of the Barbie doll A) is needed to pa y for the cost of the Taiwanese plastic used to make the dolls. B) pays for the Chinese labor used to assemble the doll. C) is captured in the United States. D) goes to the Japanese manufacturer of the hair which is used for the dolls. Answer: C Diff: 2 T opic: Why Study Economics?: Economics in Practice Skill: Fact Learning Outcome: Micro - 1 29) Related to the Economics in Practice on page 6: The opportunity cost to Mattel of having its Barbie doll assembled in China is A) the low wages paid to Chinese worke rs. B) the $2 export value the doll carries when it leaves Hong Kong. C) the $8 of its $10 retail value which is captur ed in the United States. D) having the Barbie doll assembled in the next best available location. Answer: D Diff: 2 Topic: Why Stu dy Ec onomics?: Economics in Practice Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 30) The reas ons to study economics include which of the following? A) to be an informed citizen B) to understand society C) to learn a way of th inkin g D) all of the above Answer: D Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 31) Marginalism is A) the best alternative that we forgo when making a decision. B) the study of how socie ties choose to use scarce resources. C) a market situation in which profit opportunities are eliminate d almost instantaneously. D) the process of analyzing the additional costs or benefits arising from a decision. Answer: D Diff: 1 Topic: Why Study Econo mics? Skill: Definition Learning Outcome: Micro - 1

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    10 32) Economics is best defined as the study of A) financial decision making. B) how consumers make purchasing decisions. C) choices made by people faced with scarcity. D) inflation, unemployment, and econ omic growth. Answer: C Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Mic ro - 1 33) The Industrial Revolution refers to the rise of the modern factory system in ________ during the late eighteenth and early nineteenth centuries. A) t he United States B) England C) France D) Germany Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro - 1 34) Which of the following statements is correct? A) Economics is a natural science. B) In large measure, economi cs is the study of how people make choices. C) If poverty was eliminated there wo uld be no reason to study economics. D) Economic analysis can be used to explain how societies, but not individuals, make decisions. Answer: B Diff: 1 Topic: Why Study Econo mics? Skill: Fact Learning Outcome: Micro - 1 35) Economics is the study of A) h ow to invest in the stock market. B) how society uses limited resources. C) the role of money in markets. D) how government officials decide which goods and services are produ ced. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro - 1

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    11 36) You decide to go to LEGOLAND after you visit Disneyworld in Orlando. The cost of going to LEGOLAND after you visit Disneyworld is the ________ cost of getti ng from Disneyworld to LEGOLAND. A) efficiency B) marginal time and money C) opportunity D) profit maximizing Answer: B Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 37) Suppose that you s ign up for a one - day cooking class at the local culinary school for $75. Once you arrive at the clas s, you discover that you must purchase an apron for an additional $5. In this situation, the additional $5 you pay for the apron is an example of A) an inef ficient cost. B) marginal cost. C) opportunity cost. D) an economic loss. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 38) You have decided that you want to attend a renaiss ance fair as King Henry VIII. You estimate that it will cost $80 to assemble your costume. After spending $80 on the costume, you realize that the additional pieces you need will cost you $20 more. The marginal cost of completing the costume is A) $20. B) $60. C) $80. D) $100. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1

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    12 39) You have narrowed down your Friday night plans to either going bowling or playing billiards. If you choose to g o bowling, then for you playing billiards is the ________ of going bowling. A) opportunity co st B) marginal cost C) empirical cost D) variable cost Answer: A Diff: 1 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outc ome: Micro - 1 40) That which we forgo, or give up, when we make a choice or a decision is kn own as A) equity. B) causation. C) correlation. D) opportunity cost. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Mic ro - 1 41) Scarce resources give rise to the concept of A) efficient markets. B) opportunity costs. C) laissez - faire. D) positive economics. Answer: B Diff: 1 Topic: Why Study Economics? Skill: Fact Learning Outcome: Micro - 1 42) Which of the following is an opportunity cost of attending college? A) the cost of your apartment or do rm B) the income you could have earned if you didn't attend college C) the cost of the food that you consume while you are attending college D) the education you gain from atte nding college Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1

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    13 43) If your tuition is $2,000 this semester, your books cost $400, you can only work 10 rather than 40 hours per week d uring the 15 weeks you are taking classes and you make $12 per hour, and your ro om and board is $4,000 this semester (same as if not attending college), then your opportunity cost of attending college this semester is A) $2,400. B) $2,760. C) $7,800. D) $1 1,800 . Answer: C Diff: 3 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1 44) If your tuition is $20,000 this semester, your books cost $2,000, you can only work 10 rather than 40 hours per week durin g the 15 weeks you are taking classes and you make $15 per hour , and your room and board is $8,000 this semester (same as if not attending college), then your opportunity cost of attending college this semester is A) $22,000. B) $22,150. C) $28,750. D) $36 ,750. Answer: C Diff: 3 Topic: Why Study Economics? Skill: A nalytical AACSB: Analytical Thinking Learning Outcome: Micro - 1 45) If you own a condo and you decide to lease it to your cousin, A) there is no opportunity cost of leasing the condo because you o wn it. B) there is an opportunity cost of leasing the cond o because you could have chosen to live in it. C) there is no opportunity cost of leasing the condo because you collect rent from your cousin. D) the only cost relevant to this decision is the price you paid for the condo. Answer: B Diff: 2 Topic: Why St udy Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1

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    14 46) You own Star Wars - The Last Jedi on DVD. The opportunity cost of watching this DVD for the fourth time A) is zero, since you own it. B) is one - fourth the cost of the DVD, as this is the fourth time you have watched it. C) is the value of the alternative use of the time you spend watching the DVD. D) must be the same as the opportunity cost of watching it t he first time. Answer: C Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1 47) Opportunity cost is A) what we give up to ge t something else. B) marginal cost divided by total cost. C) the same as real cost. D) all of the above. Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro - 1 48) Economists often refer to "good deals" as A) profit opportunities. B) break - even propositions. C) efficient market o utcom es. D) those with no opportunity cost. Answer: A Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro - 1 49) If you can download 10 ring tones for your cell phone for $10 or you can download 11 ring tones for your cell pho ne fo r $10.50, then the marginal cost of the eleventh ring tone is A) $0.50. B) $10.00. C) $10.50. D) $20.50. Answer: A Diff: 2 Topic: Why St udy Economics? Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro - 1

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    15 50) If you eat at a Las Vega s casino that charges $12 for its all you can eat buffet, then the marginal cost of your third trip to the buffet line is A) zero. B) $4. C) $12. D) $36. Answer: A Diff: 2 Topic: Why Study Economics? Skill: Analytical AACSB: Analytical Thinking Le arnin g Outcome: Micro - 1 51) An efficient market is a market A) that deals in unlimited resources. B) in which long - term profits are guaranteed. C) in which profit opportunities are eliminated almost instantaneously. D) in which there are no opportunity c osts. Answer: C Diff: 1 Topic: Why Study Economics? Skill: Definition Learning Outcome: Micro - 1 52) If informati on is more costly and less easily available, then usually this A) makes markets more efficient. B) makes markets less efficient. C) decreas es pr ofit opportunities. D) decreases the opportunity cost of acquiring more information. Answer: B Diff: 2 Topic: Why Study Economics? Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro - 1

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